Fifty-two percent of young adults in the United States use Spotify on a weekly basis, myself included. But over the past year I have felt a growing internal conflict with using Spotify knowing how little the artists I support get paid. My internal conflict with Spotify is over how difficult they have made it to support the artists I care about the most. They’ve devalued music into a commodity, even to its creators. No one likes asking for money, including bands, so they’ll likely send you over to Spotify before even suggesting you buy their CD. But what can artists do?
Merchandise is Clutter and Live Nation Ruined Concert Tickets
No one really knows how Spotify has affected the music industry. Music retail revenues will likely never again hit the $30 billion market of the early 2000’s, but streaming now makes up more revenue than CD and MP3 sales combined.
Many independent artists realize Spotify is a great long term revenue stream. Even Drake sees how important being a top streaming artist is, even at the expense of forgoing album sales. Album sales decline quickly after their initial release, but Spotify uses its extensive catalog to serve up long tail songs curated to a specific user. This means at least a trickling of royalties for artists years after an album has been released.
Again, 52% of 18 to 29 year olds are using Spotify as a main listening channel with no mechanism to monetize the channel further. Even traditional radio royalty payments include financial incentives giving higher payouts for trending songs played multiple times a day. Asking someone to buy your MP3s on iTunes adds too much friction for the average person (I don’t even have a card on file with iTunes), especially when they can continue to stream it without any added cost.
Spotify is a great service. It has introduced me to artists I otherwise never would have listened to. The argument from Spotify supporters is that music is a loss leading commodity to get more concert and merchandise sales (á la U2 & Apple circa 2014). While this may be the case for Top 40 artists, I don’t think it translates well for the bulk of the industry. Similar to CDs, merchandise is just be clutter. Do I really need another band t?
Maybe I’m in the minority, and these artists are making more money via concert tickets and merch from the increased discovery and availability of their music. I certainly hope so, but I don’t think it is the case across the board. Summer ticket sales have been struggling for at least the last decade, to the point that Live Nation sold $20 ‘all in’ tickets for a ton of shows this summer.
Spotify Depends on Niche Artists
Streaming services, Spotify in particular, rely on independent and lesser known artists to fill out their catalog. Comparing Apple Music to Spotify, Spotify’s big competitive advantage has been its ability to curate playlists that are creepily personalized to each user’s tastes. This feature alone has kept millions of people from using the default music app for iPhone that has more songs and is completely integrated into the Apple ecosystem.
With that noted, Spotify needs to do more to help support these artists that are critical to their platform. There are dozens of features Spotify could add, including:
- Adjust the payment calculation to support the individual artists that someone listens to. For example, premium users $10 monthly fee (less Spotify’s 30%) would be divided among the songs they listened to that month. Listening to 1000 songs a month would payout 0.7 cents per song.
- Inline with traditional radio play, artists would be financially compensated by their performance. If a song is trending, then a payout of 1.25x the standard would go into effect for the period. ‘Trending’ would have to be further defined, maybe something similar to surge pricing where it is based off of past typical listening.
- Tipping would be another straightforward feature that wouldn’t inhibit the current payment structures. Maybe it comes in the form of a feature to enable optional advertising to premium users. Similar to an Amazon Smile approach, you could ‘donate’ the advertising revenue Spotify would payout to specific artists you elect.
I really want to go all in with Spotify, but this is not the Spotify I knew when I first signed up.
Also published on Medium.